NEW YORK (Reuters) – Grand Canyon Education Inc (LOPE.O: Quote, Profile, Research, Stock Buzz) shares were down about 5 percent to $11.40 in midday trading on the Nasdaq in their debut, after falling as low as $9.49 earlier in the session.
After its initial public offering priced at $12 on Wednesday night, Grand Canyon’s shares began trading for $10 Thursday, at a 17 percent discount. The company had lowered the estimate range twice prior to the IPO, signaling investor reticence toward new stocks.
“The drop in price is indicative of the overall market conditions,” said Todd Young, an equities analyst with Morningstar. “You have a lot of quality stocks trading at discounts so if you have a brand new IPO, it’s normal for there to be a bit of skepticism.”
Grand Canyon’s IPO broke a 15-week spell without a deal in the United States, the market’s longest drought since the 1970s, and was the first to launch since Texas-based Web hosting company Rackspace Hosting Inc (RAX.N: Quote, Profile, Research, Stock Buzz) in early August.
Grand Canyon’s IPO raised $126 million, making it the 18th largest IPO of 2008, according to Thomson Reuters data, but the company had estimated it would raise as much as $230 million when it filed in May.
Some 75 percent of the deal’s proceeds will go to a special dividend for existing shareholders, which include the private equity firm Endeavour Capital Fund IV L.P.
As of late September, the company had an enrollment of 22,000 students. For the nine months ended Sept. 30, the company had net revenues of $109 million, up 60.1 percent over the same period a year earlier, and operating income of $9 million, according to a regulatory filing.
The company sold 10.5 million shares in a deal led by Credit Suisse (CSGN.VX: Quote, Profile, Research, Stock Buzz) and Merrill Lynch (MER.N: Quote, Profile, Research, Stock Buzz), who will have the option to purchase up to $1.575 million additional shares to cover over-allotments of shares.
By Phil Wahba
(Editing by Brian Moss)